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Chinese polysilicon price has risen by 65% from a historically
low level in June 2020. There are three factors that explain this
dramatic surge in prices. The first trigger was the serious
explosion at the fab of GCL Poly, one of the world's largest
polysilicon producers, which could take months to recover, together
with another accident in major producer Daqo's Xinjiang fab on 1
July 2020, both limiting the total volume of material available in
the market and driving Xinjiang authorities to impose strict
security checks on polysilicon facilities in the province to avoid
further incidents. These measures imply prolonged scheduled
maintenances that are further reducing the availability of
polysilicon in the market.
Second, to make matters worse, Xinjiang Uyghur Autonomous
Region, where more than 50% of Chinese polysilicon capacity is
located, is currently suffering an outbreak of COVID-19. Because of
the stringent regulations to contain the spread of COVID-19,
logistics are severely disrupted, thus making it very challenging
to transport polysilicon from Xinjiang towards the largest
monocrystalline wafer locations in Yunnan and Inner-Mongolia
provinces.
Finally, on 18 August 2020, Yongxiang Polysilicon, owned by
Tongwei Group, stopped production of its 20,000 MT facility in
Leshan, Sichuan Province, due to the unprecedented flood. Restart
of the production depends on potential flood threats, regulatory
requirements and facility check.
Polysilicon shortage by Chinese players opens a window
of opportunity for international polysilicon companies
Most international polysilicon suppliers, who have been
struggling to remain profitable under a very competitive price
environment dominated by Chinese suppliers, paused production in
the first half of 2020. However, the current price rise and
shortage, if maintained for a few months, creates an opportunity to
partially restart operations for some of these international
manufacturers but timing required for production ramp up and
transportation would delay the supply to Chinese wafer suppliers
until the fourth quarter.
IHS Markit view on the polysilicon price trend is that
polysilicon capacity in Xinjiang, where 50% of Chinese total
capacity is located, will not return to normal production levels
before the end of the year and that international supply will not
be enough to compensate the downturn in production. Prices will
remain high in the next quarter, even though the price hike will
slow down with capacities gradually recovering from
maintenance.
Implications on the demand side in China in H2 2020 and
in international markets
Following the price hike for polysilicon, wafer and cell
producers have raised prices to balance out increasing raw material
costs and maintain margin. Similarly, module prices are also
following the upward trend. The shortage in materials and the
increase in module prices in the third quarter 2020 will have a
negative impact on solar demand this year.
The unsubsidized segment in China will be the most impacted with
projects being delayed to 2021. Due to the increase in module
prices, grid-parity projects, which do not enjoy subsidies and do
not have hard deadlines within 2020, will be delayed, waiting for
better procurement conditions.
Overseas projects with tight margins could be equally impacted
with potential for delays into 2021.
IHS Markit will continue tracking demand in overseas markets in
the following weeks, as continuing module price hike might impact
the schedule of some PPA contracts or upcoming tender bids and will
incorporate all this information into the next edition of our PV
Installation Tracker to be published mid-September 2020.
Dr. Edurne Zoco is an executive director for the Clean
Technology & Renewables team at IHS Markit, leading the group's
research activities across renewables, batteries, and energy
storage.
Siqi He is a research analyst with the Clean Technology
& Renewables team at IHS Markit focusing on solar
research.
